The politics of how the UK is set up to leave the European Union remains a key driver of negative sentiment on financial markets. Add in the slowing global growth trends, the US/China trade dispute and the argument over the Italian budget and there are plenty of reasons to be negative. We consider the outlook on forex, equities and commodities.
Oh Brexit! It is possible that in years to come the word “Brexit” will be appropriated to become a swear word in the English language. Domestically, the situation is a complete mess. The UK has a deal agreed by the EU-27 (after some wrangling from Spain at yesterday’s EU Council Summit meeting), however with passionately vocal dissent from all sides in the House of Commons, it is becoming increasingly apparent that the deal could be hugely (and embarrassingly for Mrs May) defeated in the vote on 11th December. The problem is that a renegotiation looks futile as the EU position appears to be firmly set and unlikely to give the UK enough ground to turn a defeat into a vote that Mrs May can win. At least it would need the Irish backstop to be dropped in order for the hard Brexiteers and the DUP to even contemplate voting for the deal, something the EU will not accept. So in this event, the two binary options become increasingly likely, either a No Deal Brexit, or no Brexit at all. The latter option is becoming ever more popular as an option in a divided Parliament but would require either another general election, or a second referendum to be achieved. I remain dumfounded that very few people seem to understand that it would only take a simple majority in a Parliamentary vote of no confidence against the Government that could trigger Mrs May’s downfall and a general election. The DUP currently lend their “confidence” but will this continue if Mrs May’s deal suffers what will surely be a catastrophic loss? The UK is legislated to leave the EU on 29th March 2019. Tick tock.
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